Small business cashflow hit by late payments

Date: 11.08.2011

Australia's small businesses are struggling to meet liabilities on time as a result of overdue payments, Bibby's latest survey reveals

August 11, 2011

Australia’s small businesses are continuing to experience serious cashflow problems as a result of overdue customer payments, according to a new survey.

The Bibby Small Business Barometer shows 25 percent of small businesses experienced cashflow shortages in the past 12 months.

Almost one in two small business decision makers have experienced overdue customer payments in the past 12 months, and the majority (42 percent) say the offenders are resorting to excuses for slow payments.

Bibby Financial Services Managing Director Greg Charlwood says many small businesses are struggling to meet liabilities on time and are even contending with non-payment.

The report found smaller firms have struggled the most over the last 12 months, with payment terms blowing out by an average of two days compared with 12 months ago.

Bibby’s findings are parallel to Dunn & Bradstreet’s recent Trade Payment Analysis for the June quarter, which found the number of ‘severely delinquent’ payments (90 day or more overdue) jumped by almost 20 percent compared with the June quarter 2010, meaning businesses are waiting for over three months for much needed cash.

According to the Bibby Barometer, 52 percent of small businesses that deal with big companies and government clients are frustrated with slow payments and when considering outlook for payments terms, small businesses remain pessimistic.

"Thirty-eight percent of small businesses are expecting the length of time they must wait to be paid to increase further in the coming quarter, which will no doubt place considerable pressure on cash flow management," Charlwood says.

In addition to slow payment terms, other key challenges identified by small businesses include: rising interest rates (30 percent), reduced consumer spending (30 percent), increased staff wages (29 percent) and increasing fuel costs (28 percent).

"The combinations of these factors suggest tough economic conditions in the future for small businesses," Charlwood says.

As many as half of small businesses reported that cash flow is now more difficult to manage than it was 12 months.

Bibby’s latest survey was conducted on over 200 small businesses in Australia (excluding retail) at the end of June.